Odisha weighs options for Bangkok flight connectivity

With both AirAsia and Air India keen to run flight operations between the two destinations, the state government is carefully evaluating the proposals made by the carriers.

AirAsia has tentatively agreed to launch operations to Bangkok from March or April next year. But, its proposal is accompanied by a rider -- the operator has sought a subsidy of Rs 1.70 lakh per flight run to make the service commercially viable. AirAsia Berhad, the low-cost carrier from Malaysia, already has a pact with the Odisha government under which it avails Viability Gap Funding (VGF) in the form of subsidy for providing international flight connectivity from Bhubaneswar to Kuala Lumpur.

AirAsia was the first to launch international flight operations from Bhubaneswar. The carrier was selected through an Expression of Interest (EoI) floated by the state government in July 2016. Subsequently, in February 2017, the state government and AirAsia signed an agreement to start conditional flight service to Kuala Lumpur on VGF granted by the government.

It remains to be seen whether in the changed context of the aviation sector, the state government could still grant subsidy to an airline. When AirAsia was selected through the bidding route, direct international flight services were yet to be launched from Bhubaneswar thought the city got the international airport tag in 2013. The state general administration department then, had decided to grant subsidy to incentivise the air carriers.

The equations have changed for now as Air India also has a competing offer to run flights to Bangkok.

“We have suggested to the government to go for a fresh EoI for the next international flight connectivity as the aviation sector has seen many changes. One of the factors is the drop in air fare and with commercial viability, there needs to be a rethink on subsidy”, said a senior Odisha government official.

Odisha's tourism minister Ashok Panda said last week that the state tourism department is likely to enter into a memorandum of understanding (MoU) with Thai AirAsia (a joint venture of AirAsia and Thailand's Asia Aviation). State run operator Air India has also intended to fly from Bhubaneswar to Bangkok via Gaya (Bihar).

Mona Sharma, principal secretary (tourism & culture), Odisha said, “Both AirAsia and Air India have submitted intents to operate flights between Bhubaneswar to Bangkok. We will take a call. There can be more than one flight operator for the same route and this will be decided by commercial reasons.”

International carriers who opt to operate flights to and from the city airport would enjoy full waiver from value added tax (VAT) on aviation turbine fuel (ATF).

The state cabinet had decided to slash VAT on ATF for such carriers to zero from five per cent to boost international air connectivity.